Dubai:

Oil bulls, many who had lost faith in a price rally, may be back in action if Opec’s Thursday meeting goes as planned.

Saudi Arabia, the biggest oil exporter of the Organisation of Petroleum Exporting Countries (Opec), said on Sunday it expects an agreement between the organisation’s members and non-Opec countries on extending output cuts at a major meeting this Thursday.

The deal would extend the production cuts, which were agreed to in December, would be extended until March 2018. Saudi Arabia’s Energy Minister Khaled Al Falih said an extension through the first quarter of 2018 will help producers reach their goal of trimming global stockpiles to a five-year average,

Oil prices gained 2 per cent on Friday, and analysts say crude may extend gains in coming weeks.

Brent crude closed at $53.61 per barrel, up 2.09 per cent. US West Texas Intermediate (WTI) crude ended at $50.33 per barrel, up 1.99 per cent.

“Support ahead of the Opec meeting is likely to support the price,” said Ole Hansen, head of commodity strategy at Saxo Bank.

However, a failure to obtain deeper than expected cuts may keep a lid on any price rise.

“In the aftermath of the meeting, and unless Opec goes more aggressive than is currently expected, further upside is likely to be limited,” Hansen said.

“A deal to extend production cuts may be met by scepticism as it could see some producers (with Saudi Arabia being the most important) yield further market share,” he added. Opec and non-Opec producers will meet on May 25 in Vienna.

The Opec, Russia and other producers originally agreed to cut production by 1.8 million barrels per day (bpd) for six months from January 1.

In the medium to long term, any output cuts may help the market to a supply demand balance and with oil prices in the second half of 2017 to move to the $55-$60 level for Brent and $50-$55 for WTI, according to Vaqar Zuberi, Portfolio Manager & Senior Analyst within Mirabaud Asset Management’s Hedge Fund team.

There could be a short-term hiccup in prices.

“As this speculative positioning unwinds, oil prices remain vulnerable to move to lower levels over the short term,” Zuberi said.

“Any disappointment in inventory data or strong production data from US shale oil production is likely to move oil prices back to the low levels seen earlier in May,” Zuberi added.

US drillers added eight oil rigs in the week to May 19, bringing the total count to 720, the most since April 2015, according to Baker Hughes.

On Thursday, official data showed Opec leader Saudi Arabia’s crude exports rose 275,000 bpd in March from February and its stockpiles increased.